Dispelling Common Misperceptions
If you’ve been hit hard by the pandemic—you’ve lost your job or your family business has collapsed—you may be considering personal bankruptcy in order to get a fresh start. If you’ve never considered bankruptcy before, you may have a number of inaccurate assumptions about the potential consequences of filing. Here are some of the common misunderstandings about the impact of bankruptcy.
Bankruptcy Won’t Make All Your Debts Go Away
Though you can permanently discharge many debts in a Chapter 7 bankruptcy, there are some obligations, including child support, taxes, and student loan payments, that either cannot be discharged or may only be discharged in rare circumstances. Furthermore, changes to U.S. bankruptcy law in 2005 require you to qualify for Chapter 7 by demomstrating to the bankruptcy court that you lack the resources to repay your creditors over a 3-to-5-year period. If you don’t qualify, your only option is to renegotiate/reorganize debt under Chapter 13.
You Won’t Lose All Your Property
When you file under Chapter 13, you get to keep all your property. With a Chapter 7 bankruptcy, you may have to turn over some of your property to the bankruptcy trustee, in exchange for the right to permanently discharge debts. However, you can claim some of your property as exempt under state or federal law.
Bankruptcy Does Not Necessarily Indicate Personal Failure
Though some people end up in bankruptcy because they don’t properly manage their income and expenses, the vast majority of filers are those who experience a life event beyond their control, such as the loss of a job, a serious illness or injury, or a divorce.
You Will Be Able to Get Credit Again
Your credit score will initially drop after your bankruptcy filing. However, if you honor the commitments you make in the bankruptcy proceeding, your score can quickly rebound, often rising above where it was when you filed. Furthermore, many creditors view the decision to file for bankruptcy as a positive step, a sign that you are taking construction action to resolve your financial problems.
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we work closely with people in New Jersey in personal bankruptcy filings. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. We are currently available by phone, text message or videoconference only. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
Named a New Jersey SuperLawyer Every Year 2008–2020